By JT – Private Banker
A few years ago I had the opportunity to visit Saffron Walden County High School and help teach four maths lessons to the Year 10 students, all who had varying abilities. It was with the NatWest MoneySense education programme and the premise was to teach them how to choose the best mobile phone contract.
It was an interesting day. Not least because the pupils were mainly uninterested! They admitted that their parents regularly topped up their phone contracts by an average of £20+ a month to cover their data usage. The odd student even had a part-time job to pay towards their phone data, but it seemed that they were not interested in how to choose the right contract to get the best deal.
If we choose not to take charge of monetary education as parents, we are sending our children into their adulthood with a solid knowledge of Pythagoras’s theorem and iambic pentameter, vital in so many tricky situations, but quite often a complete inability to know how to manage their money. What I would like to see more of in the school curriculum is life maths!
Keep it in the bank
One of the first financial decisions you will make with your child is likely to be their first bank account, which will often include a debit card. If you are at this stage, here are the questions I think you should ask yourself first:
1. What is this account for?
2. Have you discussed with your child what the account is for?
3. How will it be funded?
4. What will the child be using it for?
5. Do you need to be able to restrict access to large amounts of money?
Sounds obvious, but you need to ask yourself why are you opening this account? Is it a place to put, what could end up being, quite large amounts of birthday money? Or is it for them to have a little bit of independence? They might sound like the same thing, but putting £100 plus into an account and then handing an 11-year-old a debit card and direct access to this money may be setting them up for a fall.
When my daughter turned 11, I decided that I would open a bank account for her. I figured that it’s her money, she needs to learn, I’m not going to be a helicopter mother over this. We opened an account with Lloyds and agreed to pay her £4 a week, with the ability to earn an extra £2 for chores.
Lockdown delayed this and in that time my friend introduced me to Rooster. You open a bank account with them in an app, no paper, and then your child has pots you can move the money into. A spending pot linked to a card, a saving pot, a goal pot if they are saving for something special, or a gift pot where they can gift money directly to charity. Then you agree the percentages of her allowance that goes into the account.
Each time she spends money, I get a message from the app. Don’t get me wrong, I am still not a helicopter parent, but I reassure myself that these days our children have the opportunity to spend their money more easily on games and online generally, that it may be for the best that you keep an eye on things for the first few years!
Saving your pennies
If saving is your goal, there are a lot of great options. However, quite often a bank account in your child’s name is not the best way to start; most banks won’t allow you to have third-party over it and as a minor, they cannot sign away their rights to their money.
Junior ISAs or bank accounts in your name all have their pros and cons. Again it’s all about having the discussion beforehand. When do you want your child to be able to access this money? Do you want a say in what this money is used for? Do you think having access to this money would be good for your child?
It’s an enormous and never-ending subject, but the one piece of advice I will give is to include your child in the decision, and make sure the rules are clear. You know your child best and what is best for them, so keep financial communication open and trust your instincts.
It is also important to educate your children about appreciating the money that they are given. If they receive an allowance from you, but then you as a parent continue to buy things for them, are you teaching them how to respect what money is worth? There are lots of different ways of making it right for you and your child, but you have to make sure you and your child agree on what “right” looks like.
Our parameters with our daughter was that she buys her sweets, make-up, that sort of thing, using her own money. The little fun bits. She really wanted the independence and has a sensible head on her shoulders. When I first received an allowance as a child, I had to write a letter to my parents on how much it should be and why. I always thought that was genius.